A small high-tech company must scale many walls if it wants to transform itself from a wannabe into the next Amazon.com or Intel. In addition to the typical demands of running a business, tech entrepreneurs have a whole different set of issues to deal with when growing their companies. With today's dearth of technical workers, they must find creative ways to retain employees who could quit and find a higher-paying job the very next day. High-tech entrepreneurs must learn to strike a balance between their dual roles as chief technologists and CEOs--and bring in help if their shortcomings become apparent. And they must struggle to reinvent their companies if market demand evaporates with just one move from Microsoft or another giant.

Growing a tech firm, one that manufactures or provides technology products or services, or sells products or services exclusively through the Internet, is subject to unforeseen circumstances well beyond an entrepreneur's control.

But that doesn't mean small high-tech companies are letting reality rain on their parade. By and large, tech firms see good times ahead. In fact, according to a recent study by PricewaterhouseCoopers LLP, CEOs of small high-tech companies expect to achieve stronger revenue growth than their larger counterparts: Small companies anticipate a 27.1 percent revenue increase through midyear, compared to 18.5 percent anticipated growth at large companies.

"The outlook at many high-tech companies is quite optimistic," says Murray Alter, tax partner in charge of tech and venture capital with PricewaterhouseCoopers. "Many have grown in sales and customers, and geographically in outreach. Despite [the Asian economic crisis], they continue to see strong growth in the near future."

Indeed, the economic outlook remains rosy for high-tech businesses. Still, cutting-edge entrepreneurs anticipate several potential barriers to growth. According to the study, more than two-thirds of the CEOs surveyed at small tech firms cite a lack of qualified workers as a stumbling block to achieving their revenue goals. Concern over market demand (43 percent), legislative and regulatory pressures (32 percent), competition from foreign markets (13 percent) and their own ability to manage or reorganize (26 percent) weigh heavily on their minds as well.

Taking this into account, we look more closely at these and other growing pains plaguing small high-tech companies--and what some successful entrepreneurs are doing about it.

The Hiring Line

According to the PricewaterhouseCoopers study, 84 percent of
small high-tech firms plan to add more workers by midyear. Small
tech firms desperately need more workers if they want to achieve
their lofty revenue goals. Consequently, the majority are laying
out the welcome mat for new employees.

Yet finding and retaining qualified employees remains a tall
order for tech companies of all sizes. Competition for talented
techies is verging on the cutthroat in a job market that remains
startlingly constricted.

Experts say offering flexible work environments, generous stock
options and an anything-goes dress code isn't enough anymore.
One of the best ways to attract and keep talented technical
personnel is to embark on new, innovative projects. "These are
people who need a challenge," Alter says. "They put their
heart and soul into their work--and need to have
excitement."

Linda Yates, CEO of Menlo Park, California-based Strategos Inc.,
an innovation strategy firm that specializes in collaborative
learning software, is providing just that. "We wanted to
become the antidote to Dilbert," laughs Yates, 35. "So
many people are disconnected from work, yet they spend so much time
there. We wanted to find a way to get people really excited [about
their work]."

A key part of Strategos' philosophy is creating
opportunities for innovation within the company, which now has 30
employees. "Companies are losing out on opportunities by not
providing their employees with what they need [to be innovative]
inside the office," Yates explains. "There's no law
that says companies can't build inside if they create a space
for people to do that. That way, [employees] don't need to
create spin-off companies."

It's not surprising that Strategos is taking a creative
approach to building employee loyalty. In fact, innovation is what
the firm is all about. So far, three businesses have been created
under the company's umbrella: Strategos, an innovation
consulting company; Strategos Institute, a think tank for
innovation ideas; and Strategos Innovation Environment, a software
company that creates Web, video and CD-ROM tools for collaborative
innovation. Employees are given responsibilities in all three
businesses to keep their interest level high, and many have been
influential in developing these companies from the ground up.
"We give employees more free rein," says Yates. "We
don't micromanage people. They get to be innovative."

At Strategos, all 14 high-level directors earn, in addition to
their salary, a yearly bonus divvied up according to how
members' contributions to the firm are rated by their
peers.

Another sign Strategos doesn't follow the crowd: Employees
are actually encouraged to take time off. Many members take long
trips, sabbaticals and mental-health breaks, with the assurance
their jobs will be there when they get back.

"Our belief is that [travel] actually makes people better
participants in the company," Yates says. "They get the
opportunity to pursue those interests that are good for their
personal development."

This laissez-faire attitude has paid off. Since its inception in
February 1995, Strategos has grown from a
$7 million to a $15 million company.

Ahead Of The Game

Although not all high-tech companies offer new and innovative
products and services, those that do need a market that's ready
and willing to buy. With the flood of products and services
available today, market demand remains another chief concern among
today's tech entrepreneurs.

Rudy Prince, president and CEO of JetFax Inc., a Menlo Park,
California, document communication company, knows firsthand what
it's like to be ahead of the technology curve. In 1988, Prince
started JetFax to build multifunctional laser printer/fax machines,
long before Hewlett-Packard's OfficeJet was a household
name.

With an initial $1.7 million investment, JetFax introduced the
first fax interface for laser printers in 1988. But the concept was
too new and sales weren't what Prince had hoped they'd be.
"Being on the front end [of the multifunctional-product
market] definitely had its problems," admits Prince, 41.
"You want to hit the ramp, but not too early."

For JetFax, market education proved to be the best course of
action. The company spent a lot of its resources acquainting copier
dealers with laser-printer technology and software installation.
Then, in 1994, the multifunctional-product market started to pick
up with the release of the OfficeJet from Hewlett-Packard. Xerox
entered the market shortly thereafter, driving prices down and
further familiarizing consumers with the concept.

Because of its solid core technology and early experience in the
market, JetFax was able to capitalize on the growing trend. During
the following years, it developed strategic alliances with
Hewlett-Packard, Samsung Electronics and Xerox to jointly build
multifunctional products. "There was a certain amount of
market confusion," Prince says. "So rather than doing it
on our own, we partnered with companies that had the marketing
power we needed."

Today, JetFax is a leading developer and provider of
multifunctional system technology; its M900 product line has
garnered many industry awards. The company has grown to 125
employees and three locations, and Prince projects $40 million in
sales this year.

And Prince is at it again. Last December, his company released
the JetFax M900e series of multifunctional products, which merge
e-mail capabilities with fax machines. He knows that, once again,
he's slightly ahead of his time. But, for Prince, it's a
matter of patience, perseverance and trust.

"Even though we're in the market early, it's moving
quickly," Prince says. "So many people are sending
documents via e-mail. There's definitely a market. It can't
turn overnight, but when it does, it can turn fast."

New Bag Of Tricks

In 1986, Dawn DeBruyn formed her company, Concurrent Controls,
based in South San Francisco, California, to develop software that
allows multiple users to share the power and resources of a single
computer. The company's first product, a multiuser DOS
solution, met with fair success. But with the growing popularity of
Microsoft Windows, DeBruyn knew it was time to change
direction.

Like Concurrent Controls, many high-tech companies start out
with a bang. But all too often, their moment in the spotlight is
short-lived, and without new products or services to back up their
original success, they quickly fade into obscurity.

"Building one great product just doesn't cut it,"
says William Stitt, director of the Center for Entrepreneurship of
New Technological Ventures at Rensselaer Polytechnic Institute in
Troy, New York. "Many companies reach a fork in the road and
need to follow up with a second or third product."

A new product from Microsoft finally catapulted DeBruyn's
company forward: Windows 95. Unlike previous versions of the
operating system, Windows 95 came with built-in multitasking
features that allowed users to run several programs simultaneously.
Concurrent Controls began developing Applica U2, a product that
would harness those multitasking features to let a PC user with the
Windows 95 (and now Windows 98) operating system share his or her
computer with another user who has a second monitor and keyboard.
"We knew Windows 95 would be a big success because of the
marketing power of Microsoft," DeBruyn says. "We were
convinced that if we could build [Applica U2], we'd have a
unique product."

Concurrent Controls released Applica U2 in 1997, and more than
60,000 copies have been sold to date.

But the innovating didn't stop there. Last December,
DeBruyn's company released Applica for TSE (Terminal Server
Edition) for use in network computing environments, and it has a
Windows NT version in the works. "You have to constantly be
reinventing yourself," DeBruyn says. "It's all about
natural progression."

A Closer Look

Although high-tech entrepreneurs may excel in coming up with
innovative product and service ideas, or developing a company that
is a sure-fire hit on the Internet, not all are gifted in the area
of growing and managing their businesses. Sometimes the real
barrier to success is the founder.

"If the CEO becomes a constraint to growth, [he or she]
needs to have the wisdom to [adjust his or her] role," Stitt
says. Smart owners aren't afraid to pay for people who can
handle positions they're not strong in.

Having difficulty letting go is a trap many entrepreneurs fall
into. Matthew Glickman and Mark Selcow, both 33, know this problem
well. In 1996, they founded BabyCenter, a San Francisco Internet
company that provides a complete online information resource and
store for new and expectant parents; it also has a division that
designs Web sites for health-care organizations.

Early on, Glickman and Selcow wore many hats, playing crucial
roles in the development of BabyCenter's Web site (http://www.babycenter.com), online
store and Web site development division. "As founders, we had
to do everything," Selcow says. "But we quickly realized
we were both becoming overwhelmed."

After long hours and sleepless nights, Glickman and Selcow
realized they needed to concentrate on building the company. Three
rounds of venture capital from such companies as Intel have helped,
as has the partners' focus on long-range issues, such as
developing their online store and forging strategic
partnerships.

Last year, the partners created several management positions and
tripled their staff from 20 to 65 employees. They also adopted a
management strategy that lets the reins out further: team
management. "They have to be justified, but we let the team
make its own decisions," Selcow says.

Up To The Challenge

These are just a few of the many challenges facing today's
high-tech companies. Others include concern over possible
legislation that might hinder company growth and how to manage fast
growth.

But due to their tenacious nature, many tech entrepreneurs
continue to find ways to overcome these obstacles. "Most have
eternal optimism, and unbelievable faith and hope," says
Alter. "In the end, they believe they'll be successful.
After all, that's the reason they're entrepreneurs in the
first place."

Fast Track

Names and ages: Mie-Yun Lee, 31; Brenda Chin Hsu, 32

Company name and description: BuyersZone employs
technical talent to develop and operate a Web site, http://www.buyerszone.com , to help
busy entrepreneurs evaluate and purchase office equipment and
services.

Based: Watertown, Massachusetts

Founded: 1992

Start-up costs: $20,000

1999 sales projections: $2 million

Number of employees: 15

Testing the waters:To acquire and retain the best
technical expertise, BuyersZone initially hires software engineers
on a consulting basis. This gives the company a chance to evaluate
their technical skills and how they work with other employees
before bringing them on board. "It's hard to evaluate
[technical] employees by resume only," Lee says. "This
way, we can work with them to see how they communicate with
us."

Way to grow: With sales increasing at an ultra-fast clip
of 30 percent each quarter, BuyersZone has been forced to institute
many policies for managing its brisk growth. Among them: forming
partnerships with such companies as Excite, Netscape and Yahoo;
monthly meetings to assess operations and goals; and the
development of a "great ideas" database to document
employees' thoughts on new products and company operations.

What a pair: Realizing she lacked the necessary skills to
grow her business, in 1996, Lee went in search of a CEO with strong
sales, marketing and financial-management experience. She found it
in Hsu, who now oversees BuyersZone's strategic and operational
activities. "It was too big an idea for me to do on my
own," admits Lee, who is now editorial director. "I
needed someone with a vision that would complement mine."